June release 11/07/2014

Dukascopy Bank Sentiment Index

Dukascopy Bank SA, Route de Pre-Bois 20, Internatonal Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com
Summary
Junes fndings of Dukascopy Sentment Index survey revealed that
professors were partcularly upbeat about the long term economic
prospects. Europe enjoyed the biggest gain of confdence, with the
corresponding index surging 0.12 points to the highest level this year.
The gauge for the Asia-Pacifc region also refreshed this year's high,
skyrocketng 0.07 to 0.86. In contrast North America region saw its
sentment index inching slightly higher. All in all, optmism about global
economic prospects grew 0.07 points in June to this year's high of 0.78.
While professors share optmistc long term outlook for Europe, in the
short-run they lost trust in the regions economy, as the sentment
index slipped by 0.06 to 0.52, the level last seen in February. This might
be due to the fact that the recent data out of Europe points to an
uneven economic picture, with the core countries reportng
disappointng numbers, while periphery contnues to slowly recover.
The long-term outlook might be supported by the recent decision of the
ECB to enter the unchartered waters by launching negatve interest
rates. This measure is designed to bolster economic growth in the Euro
zone and ensure infaton does not fall further.
The recent data showed that the U.S. economy contracted in the frst
quarter, with GDP coming in at 2.9%, while Canadas growth also
disappointed. Apparently, this negatve news weighed on experts short-
term outlook, as the corresponding index lost 0.06 points. However, the
long-term outlook is stll optmistc.
While Shizno Abe launches the third arrow and China shows signs of a
rebound, RBNZ hike interest rates and the Australian growth surprises
to the upside. All these have contributed to a gain in the short and long
term sentment indices.
Friday, 11 July 2014
Figure 2: Global economic sentment index
Parameter/
Region
Global Europe
North
America
Asia-
Pacifc
Six-month
economic outlook
0.63 (0.02) 0.52 (0.06) 0.67 (0.06) 0.70 (0.05)
Three-year
economic outlook
0.78 (0.07) 0.71 (0.12) 0.78 (0.03) 0.86 (0.07)
Figure 1: Mood indicator
0.56
0.58
0.6
0.62
0.64
0.66
0.68
0.7
0.72
0.74
January February March April May
Six-month economic
sentiment index
Three-year economic
sentiment index
Economic outlook (term structure)
Figure 3 represents the term structure of Dukascopy Bank
Sentment Index (Y-axis) mapped against the GDP growth
forecasts made by poll respondents (X-axis). Overall, DBSI values
and GDP growth forecasts match directonally, suggestng the
global economy will perform beter three years from now.
In the coming six months Europes economy is projected to
expand by 0.33%, the lowest rate this year, on the back of stcky
infaton in the Euro area, deterioraton in consumer sentment
and business climate, slowdown in manufacturing sectors in the
core countries, and high unemployment rate. In order to
stmulate the Euro zones economy and avoid a Japan-
style defatonary spiral, the ECB decided to take unprecedented
steps by introducing negatve interest rates. The long term
forecast hints at a slight growth of around 1.27%. Thus, the
recent ECB actons have not stll translated into strong optmism
about the Euro area economic future.
Afer striking negatve GDP data out of the North America,
experts have revised the regions six-month and three-year
growth outlook downwards, expectng a growth rate at 1.43%
and 1.93% in the near term and in 2017, respectvely.
Meanwhile, optmism concerning AsiaPacifc economic stance
spreads around the world, as the gauge of six-month growth
rose from 3.20% in May to 3.80% in June, while the regions
economy is expected to grow at 4.13% in 2017.
Figure 3: Global economic outlook (term structure)
Parameter/Region
Europe North America Asia-Pacifc
DBSI Growth f. DBSI Growth f. DBSI Growth f.
6-month economic outlook 0.52 (0.06) 0.33% 0.67 (0.06) 1.43% 0.70 (0.05) 3.80%
3-year economic outlook 0.71 (0.12) 1.27% 0.78 (0.03) 1.93% 0.86 (0.07) 4.13%
Dukascopy Bank SA, Route de Pre-Bois 20, Internatonal Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com
Friday, 11 July 2014
Dukascopy Bank SA, Route de Pre-Bois 20, Internatonal Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com
Economic development stages
Figure 4: Business cycle
Figure 4 presents the business cycle and its
phases: expansion (real GDP is increasing), peak
(real GDP stops increasing and begins decreasing),
contracton or recession (real GDP is decreasing),
and trough (real GDP stops decreasing and begins
increasing).
While the North America and Asia-Pacifc are
rushing to reach the business peak, Europe is
struggling to move up along the business cycle
curve towards the expansion phase. As confdence
in Asia-Pacifc economy contnues to increase, the
distance to business peak is constantly shortening.
In June the number of experts who see the
regions economy reaching the highest point in
three-year tme increased to 6 up from 3 seen last
month.
Meanwhile, North America is lagging behind, as
weather-hit frst quarter growth surprised to the
downside. Nevertheless, 5 professors project the
natons economy to reach business peak in 2017,
compared to one expert in the May poll.
Parameter/Region
Europe North America Asia-Pacifc
6-month EDS 3-year EDS 6-month EDS 3-year EDS 6-month EDS 3-year EDS
Contracton 8 1 2 1 2 2
Recessionary Trough 10 8 5 4 2 0
Expansion 12 20 22 20 26 22
Business Peak 0 1 1 5 0 6
6-month EDS
3-year EDS
Friday, 11 July 2014
Six-month economic outlook
Figure 5 shows the six-month economic outlook for Europe,
North America, and Asia-Pacifc. The global six-month
economic prospects fell slightly by 0.02 to 0.63 in June, as
experts have become less optmistc about short term
economic prospects in Europe and North America. The fgure
has been hovering above the 60-mark since September 2013,
adding to evidence experts confdence contnues to gradually
improve.
The European six-month sentment index declined 0.06 points,
as 27% of academic experts feel fairly negatve about the
regions economic prospects. However, 40% of the survey
partcipants are neutral, while 33% share a fairly positve
outlook.
North America also saw its gauge for economic confdence
slipping by 0.06 points in June. The index fell to 0.67, down
from 0.73 seen in May amidst negatve data on Canadas and
U.S. economic growth in the frst quarter. The majority of
those surveyed (63%) felt fairly positve, whereas a slight
minority (10%) stuck to fairly negatve view.
Asia-Pacifc, however, was the only region which enjoyed a
0.05 point increase, with the short-term economic sentment
index rising to 0.70 compared to 0.65 recorded last month.
Dukascopy Bank SA, Route de Pre-Bois 20, Internatonal Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com
Parameter/Region Global Europe North America Asia-Pacifc
Median 0.75 0.50 0.75 0.75
Mean (DBSI) 0.63 (0.02) 0.52 (0.06) 0.67 (0.06) 0.70 (0.05)
Mode 0.75 0.50 0.75 0.75
Standard Deviaton 0.21 (0.04) 0.20 (0.04) 0.19 (0.04) 0.20 (0.03)
Figure 5: Six-month economic outlook
Figure 6: Six-month economic sentment index
Friday, 11 July 2014
0
5
10
15
20
25
30
35
40
45
Definitely
negative
Fairly
negative
Neutral Fairly
positive
Definitely
positive
Europe
North America
Asia-Pacifi c
0.40
0.45
0.50
0.55
0.60
0.65
0.70
0.75
February March April May June
Europe
North America
Asia-Pacifi c
Global
Three-year economic outlook
Figure 7 presents the three-year economic outlook for
Europe, North America, and Asia-Pacifc. The three-year
global economic outlook surged 0.07 points to 0.78 from the
previous month at 0.71, with the corresponding index rising
in each region.
Europe enjoyed the biggest advance among other regions, as
the gauge jumped 0.12 points in June and reached the
highest level this year at 0.71. 70% of respondents felt
positve about the regions three-year economic prospects,
with 50% being fairly positve and 20% defnitely positve.
Meanwhile, the American index rose slightly by 0.03 points,
not being able to reach this year's high at 0.80 recorded in
January. Nevertheless, the vast majority of professors (80%)
feel extremely upbeat, and no one shared a negatve outlook.
As Asia Pacifc economies contnue to gather steam, so does
the regions three-year economic sentment index, which
surged 0.07 point in June up from the May reading of 0.79.
This is the frst tme this year when the index reached 0.86
level, with the uptrend having been sustained since April.
87% of professors shared a positve outlook, with 57% being
defnitely positve about the Asian-Pacifc long term economic
prospects.
Dukascopy Bank SA, Route de Pre-Bois 20, Internatonal Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com
Parameter/Region Global Europe North America Asia-Pacifc
Median 0.75 0.75 0.75 0.75
Mean (DBSI) 0.78 (0.07) 0.71 (0.12) 0.78 (0.03) 0.86 (0.07)
Mode 0.75 0.75 0.75 0.75
Standard Deviaton 0.20 (0.01) 0.21 (0.02) 0.18 (0.03) 0.18 (0.01)
Figure 7: Three-year economic outlook
Figure 8: Three-year economic sentment index
Friday, 11 July 2014
0
5
10
15
20
25
30
35
40
45
Definitely
negative
Fairly
negative
Neutral Fairly
positive
Definitely
positive
Europe
North America
Asia-Pacifi c
0.40
0.50
0.60
0.70
0.80
0.90
February March April May June
Europe
North America
Asia-Pacifi c
Global
Parameter/Region
Europe North America Asia-Pacifc
Local experts Foreign experts Local experts Foreign experts Local experts Foreign experts
6-month economic outlook 0.53 0.51 0.73 0.64 0.60 0.75
3-year economic outlook 0.73 0.70 0.85 0.74 0.83 0.88
Economic outlook comparison
Figure 9 presents a discrepancy in views on the economic
outlook among the local and foreign experts. In June, the local
and foreign professors disagree on every regions economic
stance in the short and long term.
Europe saw a slight diference in views both for the 6-month and
three-year economic outlook, with European professors being
more optmistc than their foreign colleagues.
Meanwhile, experts outside North America do not share that
bright economic outlook compared to Americans. The
discrepancy in the short term forecasts reaches 0.09 points,
while the diference in views becomes even more signifcant
when it comes to the three-year growth prospects.
Slightly diferent picture can be observed when analyzing
professors responses concerning the Asia-Pacifc region. Unlike
the previous report results which showed local professors were
more upbeat than their foreign colleagues, Junes poll fndings
reveal that local experts have become less confdent in the
regions six-month and three-year economic outlook, as the
discrepancy reached 0.15 points and 0.05 points, respectvely.
Dukascopy Bank SA, Route de Pre-Bois 20, Internatonal Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com
Figure 9: Discrepancy in views on economic outlook among local and foreign experts (*1)
Friday, 11 July 2014
-0.20
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
Six-month economic outl ook Three-year economic
outlook
Europe
North America
Asia-Pacifi c
Descripton
Startng from November 2011, Dukascopy Bank SA is publishing a monthly Dukascopy Bank Sentment Index (DBSI). The index is based on a survey of 30 experts
from academia (10 from every region in focus), who are asked to assess future (six-month and three-year) economic prospects of the three regions: Europe,
North America and Asia-Pacifc.

The DBSI can take values from 0 to 1 as outlined below.
Parameters
Median the middle observaton in a data set;
Mean the sum of the values divided by the number of values;
Mode the value that occurs most frequently in a data set;
Standard deviaton the variaton from the average (mean).

Calculatons
(*1) diference between local experts mean estmate and foreign experts mean estmate.

Universites that have partcipated in Junes poll:
Syracuse University, University of Georgia, Indiana University Robert H. McKinney School of Law, University of Utah, Duquesne University of the Holy Spirit,
Jnkping Internatonal Business School, University of Bamberg, RISEBA, ISMAI, School of Accountng and Administraton of Porto, University of Vienna, Erasmus University
Roterdam, Zurich University of Applied Sciences, Freie Universitt Berlin, Birkbeck, University of London, Higher School of Economics, University of Basel, Philipp University of
Marburg, East China University of Science and Technology, Indian Insttute of Management Bangalore, Universit Malaysia Sarawak, Insttute of Business Administraton,
Karachi, Shanghai Jiao Tong University, Aarhus University, University of St. Gallen, BA School of Business and Banking
Dukascopy Bank SA, Route de Pre-Bois 20, Internatonal Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com
Value Outlook
0 Extremely negatve
0 0.5 Negatve
0.5 Balanced
0.5 1 Positve
1 Extremely positve
Explanations
Dukascopy Bank SA, Route de Pre-Bois 20, Internatonal Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 research@dukascopy.com
Disclaimer
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products. Dukascopy group assume no responsibility for the completeness or the accuracy of any data contained in this artcle. Financial fgures indicated in this
artcle have not been verifed by the Dukascopy group. Views, opinions and analyses are those of the author of the artcle, and are not endorsed by the Dukascopy
group.

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